Craigslist posts satisfaction

Perhaps most inscrutably, at least to capitalists who figure that Internet businesses exist to make as much money as possible, Craigslist refuses to "monetize" itself. It leaves money on the table that's there for the easy taking, analysts say. If they ran related text or display ads next to listings, for example, they could add untold millions to their balance sheet.

The privately held company, which doesn't release financial figures, could also sell itself to the highest bigger. Google recently bought the video-sharing site YouTube for $1.6 billion. (According to Alexa, YouTube is the fifth most popular US website; Craigslist is No. 9.)

Why doesn't Craigslist take advantage of these opportunities? Because its customers aren't asking for them, says Buckmaster in a telephone interview. "Our users, up to this point anyway, have not been requesting text ads or banner ads or any of those things. So that's why we haven't been adding them."

Becoming as profitable as possible isn't even a company goal, he says. "The average business operates to see what's the maximum amount of money that can be made, even if that involves taking an adversarial role toward their users or customers. We're not interested in entering an adversarial role with our users."

Craigslist makes money by charging $25 for job postings in six major US cities (New York, Los Angeles, Washington, Boston, Seattle, San Diego) and $75 per job posting in San Francisco. It also charges New York apartment brokers $10 per listing. The rest of the ads, as well as numerous discussion forums on subjects from fitness to travel, are free.

While Craigslist doesn't disclose its income, anyone putting pencil to the back of an envelope can see how the dollars add up. If just 100,000 of the 750,000 monthly job postings were paid for at $25 each, for example, that would generate $2.5 million per month or $30 million annually.

With such a strong cash flow and modest expenses, Craigslist simply may have no desire to change its laid-back approach. And since the company continues to grow, its value will only rise if Mr. Newmark (who continues at the company under the title of "customer service representative" while pursuing outside interests as well) and his co-owners ever decide to sell.

"They've got a loyal audience; people are used to seeing [Craigslist] look a certain way and using it in certain ways," says Barry Parr, an analyst at JupiterResearch in San Francisco, who tracks Internet technologies and businesses. "Very often, tampering with those kinds of business models can lead to unexpected and unpleasant results. There is that old story about the goose that laid the golden egg. And that story exists for a reason."

As Craigslist continues to hover between being a moneymaking business and an online community, where it should go from here may be as much a philosophical decision as a strategic one, Mr. Parr says. "[I]t kind of flows from that idea that you don't turn every successful community into an opportunity to make the maximum amount of money," says Parr, who speaks from personal experience: He's bought and sold things himself on Craigslist and "the experience has been uniformly positive."

Instead of being puzzled that Newmark isn't squeezing every dollar out of Craigslist, says Paul Saffo, a longtime Silicon Valley trend forecaster, entrepreneurs ought to try to emulate him. Newmark is an example of the adage, "Know yourself, and know what's enough," says Mr. Saffo, who adds that he's become "pretty well" acquainted with Newmark, and that Newmark is "a happy man."

Page: 1 | 2